Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q4 2020 Earnings Presentation
40 slides from Sun Life Financial's earnings presentation, February 2021
Slide 1: Q4 2020 Building Sustainable Shareholder Value
Q4 2020 Building Sustainable Shareholder Value
Slide 2: Business overview
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 2
Slide 3: A $33.1 billion leading global financial services organization
A $33.1 billion leading global financial services organization1 Operating through a balanced and diversified model and focused on creating shareholder value now and in the future S U N L I F E • Q 4 2 0 2 0 1 Market capitalization (C$) as at December 31, 2020 3
Slide 4: The Sun Life story
The Sun Life story • A diversified business model, with four strong pillars that can each compete, win and grow in their respective sectors and which leverage each other • Bound together by a strong balance sheet and risk culture, including no U.S. Variable Annuity or U.S. Long-Term Care • Digital t
Slide 5: Executing on our ambition to be one of the best insurance and asset management companies globally
Executing on our ambition to be one of the best insurance and asset management companies globally A Leader in Insurance and A Leader in U.S. Wealth Solutions in our CAN US Group Benefits Canadian Home Market A Leader in Asia A Leader in Global AM ASIA through Distribution Asset Management Excellence
Slide 6: Consistently delivering value to shareholders
Consistently delivering value to shareholders 5-year total shareholder return 1 Progress on medium-term objectives December 31, 2020 9.6% Medium-term objective 5-Year3 Sun Life 9.3% Underlying ROE2 TSX 12-14% 13.5% Global lifecos 5.5% Underlying EPS growth2 8-10% 8% Canadian lifecos 5.0% Dividend pa
Slide 7: Digital transformation deeply embedded throughout the organization
Digital transformation deeply embedded throughout the organization Build new digital models Use digital to be personal, predictive, and proactive • Asia digital sales channels, including affordable products • Predictive models for advisor recruiting and through online marketplace Lazada Client reten
Slide 8: Balanced and diversified business
Balanced and diversified business Business type diversification Business Group diversification 2020 underlying net income 1,2 2020 underlying net income 1,2 Run-off UK 9% 5% Asset U.S. Management 16% Asset Wealth Management 32% 13% 32% Asia 16% Group Individual Canada Insurance Insurance 31% 21% 25%
Slide 9: Leveraging global trends
Leveraging global trends • Demographic shifts: changing population including the aging of Baby Boomers and growth of Millennials • Digital transformation: digital, data and analytics changing Client behaviours and expectations • Downloading of responsibility: increasing shift in responsibility from
Slide 10: Business group results & highlights
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 10
Slide 11: Business group performance
Business group performance Reported net income ($ millions) Underlying net income 1 ($ millions) Impact of currency decreased reported net income by $1M Impact of currency decreased underlying net income by $3M 333 275 267 255 281 264 228 243 131 136 132 148 143 137 116 88 CORP CORP 22 2 CAN U.S. AM
Slide 12: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q4’20 and 2020 highlights Underlying net income 1 • Proactively connected with Clients over 15 million times in 2020 via ($ millions) 1,036 1,073 949 1,012 our digital coach, Ella, assisting them with an additional $700 million in wealth deposits and $1 billion
Slide 13: Shaping the industry and capitalizing on opportunities in Canada
Shaping the industry and capitalizing on opportunities in Canada Shaping the market through innovative Delivering quality performance through financial advancements and digital capabilities discipline and putting the Client at the centre • Lumino virtual healthcare capabilities including primary car
Slide 14: Deepening Client relationships in U.S. Group Benefits
Deepening Client relationships in U.S. Group Benefits Q4’20 and 2020 highlights Underlying net income 1 • After-tax profit margin for U.S. Group Benefits of 8.0%1,2 (US$ millions) 425 396 399 • Managed 100% of Client enrollments virtually throughout the pandemic, 289 contributing to a 13% overall in
Slide 15: Growing through U.S. market opportunities
Growing through U.S. market opportunities Employee benefits Stop-loss Employees responsible for more 61%4 of U.S. employees are covered by a health and benefits costs but lack self-insured plan with a trend of smaller relevant education and experience employers moving in this direction5 Growing life
Slide 16: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q4’20 and 2020 highlights Underlying net income 1 • Our new TPBank bancassurance partnership in Vietnam nearly ($ millions) 550 579 doubled our sales in the country in its first year; entered into a second 461 523 bancassurance partnership wit
Slide 17: Capturing growth opportunities in Asia
Number of advisors +12% Capturing growth opportunities in Asia year-over-year Local Markets International Hubs Philippines China Hong Kong • Ranked 1st in insurance • 8th in insurance among foreign • 2nd largest MPF provider based sales1,2 JVs1,6 on net inflows, 3rd based on AUM1,11 • 2nd largest mu
Slide 18: Expanding asset management capabilities
Expanding asset management capabilities Q4’20 and 2020 highlights Underlying net income 1 • Completed the acquisition of a majority stake in InfraRed; on January ($ millions) 1,004 1,128 925 812 5, 2021, completed the acquisition of a majority stake in Crescent, adding $39 billion of AUM1 • SLC Mana
Slide 19: MFS: diversification of assets under management
MFS: diversification of assets under management1 Asset class mix Investor type US$, as at December 31, 2020 US$, as at December 31, 2020 Non-U.S. Balanced Retail Fixed 4% 6% Insurance Income 10% 13% Non-U.S. Equity 42% US$610 U.S. Retail 52% billion AUM1 Institutional U.S. Equity 32% 41% S U N L I F
Slide 20: SLC Management: diversification of assets under management
SLC Management: diversification of assets under management1 Asset class mix Investor type $, as at December 31, 2020 $, as at December 31, 2020 Cash and Private Fixed Endowment/ Other Income foundation 4% 4% Infrastructure Insurance 2% 12% companies 21% Public Fixed Real Estate Income Debt $106 40%
Slide 21: Capital management
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 21
Slide 22: Capital generation provides good capital flexibility
Capital generation provides good capital flexibility Capital deployment priorities Funding Target dividend organic payout ratio of • Capital deployment priorities growth 40-50%1 unchanged • Target minimum cash at the M&A holding company of $500 opportunities Share million2 and strategic buybacks3 in
Slide 23: Strong capital position with significant deployment potential
Strong capital position with significant deployment potential 1 Capital deployment potential Deployment opportunities ($ billions, at December 31, 2020) Type Considerations Additional Cash2 financial leverage Organic Making further investments in building out new business $2.6 investments models and
Slide 24: Capital model provides financial flexibility
Capital model provides financial flexibility SLF Capital metric LICAT 147% SLF Financial leverage ratio 23.5% Leverage capacity to 25%/30% ~$0.6B/$2.9B Cash and other liquid assets $3.1B SLA Asset Management LICAT 127% SLC UK Canada Bermuda Asia U.S. MFS Management Capitalized to meet local capital
Slide 25: Strong operating and financial leverage
Strong operating and financial leverage Q4 2020 operating Debt supporting reserve financing leverage debt Senior debt 300 ($ millions) Total operating leverage debt 300 Q4 2020 capital Subordinated debt 4,781 Tier 2 ($ millions) SLEECS (innovative tier 1 securities) 200 Tier 1 Preferred shareholders
Slide 26: LICAT capital framework
Total ratio Total ratio LICAT capital framework (SLF Inc.) (SLA Inc.) 147% 127% Available capital Surplus allowance + eligible deposits + • Similar to MCCSR • Essentially the provisions for adverse deviation • Retained earnings / common and preferred (PfADs) for non-economic risks equity continue to
Slide 27: Asset portfolio
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 27
Slide 28: High quality, well-diversified investment portfolio
High quality, well-diversified investment portfolio Debt securities by credit rating Investment profile As of December 31, 2020 Highly diversified with the As of December 31, 2020 • BBB- BB and lower largest non-government BBB 3% 2% related exposure at 0.4% 10% of total fixed income AAA Debt securit
Slide 29: Active repositioning of our portfolio to prepare for a downturn
Active repositioning of our portfolio to prepare for a downturn Private Fixed Income Commercial Mortgage Public Debt Securities Commercial Real Estate (Corporate Loans) Loans 3% 2% 4% 10% 3% Reduction Reduction 15% 10% 13% in exposure in retail 80% 75% to Alberta exposure 33% 37% BBB A 10% 8% 18% 15
Slide 30: Highlighted exposures – debt securities and loans
Highlighted exposures – debt securities and loans Hotels, Oil & Gas Oil & Gas Transportation Restaurants Real Estate1,2 • 96% investment grade Exposure (Auto & Aviation) December 31, 2020 & Leisure • 58% in pipelines, storage or transport ($ millions) • 13% in private loans Value % Value % Value % V
Slide 31: Mortgages and investment property exposures
Mortgages and investment property exposures Mortgages by type and geography 1 Mortgages by type and rating 1,5 As of December 31, 2020 As of December 31, 2020 3 Multi-family Multi-family ($millions) Office Industrial Retail residential Other Total % of Total ($millions) Office Industrial3 Retail res
Slide 32: Sustainability
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 32
Slide 33: Strong sustainability achievements and recognition in 2020
Strong sustainability achievements and recognition in 2020 Financial Healthier Sustainable Security Lives Investing (11 years in a row) • $1B of insurance • $38M committed • “A” rating or coverage and to diabetes higher in every PRI $700M of savings globally since 2012 module for Sun Life products d
Slide 34: Appendix
Appendix 34
Slide 35: Market movements and impacts in the quarter
Market movements and impacts in the quarter Equity Market Impacts Q4’20 Q3’20 Q2’20 Q1’20 Market Movements QTD YTD ($millions, post-tax) December 31, 2020 December 31, 2020 Equity market movement and 122 42 105 (303) S&P/ TSX +8.1% +2.2% volatility S&P 500 +11.7% +16.3% Basis risk (14) 8 (46) (57) C
Slide 36: Market sensitivities
Market sensitivities Change in Interest Rates 5 As at December 31, 2020 As at December 31, 2019 50 basis point 50 basis point 50 basis point 50 basis point ($ millions, unless otherwise noted) decrease increase decrease increase Change in Equity Markets 1 Potential impact on net income2,3,6 $(100) $
Slide 37: Reconciliation of Select Net Income Measures
In this presentation, Sun Life Financial Inc. (“SLF” or “SLF Inc.”), its subsidiaries and, where applicable, its joint ventures and associates are referred to as “we”, “us”, “our”, “Sun Life” and the “Company”. Sun Life Assurance Company of Canada is referred to as “SLA”. Use of Non-IFRS Financial M
Slide 38: Forward-Looking Statements
Forward-Looking Statements From time to time, the Company makes written or oral forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities l
Slide 39: Peer Groups included in TSR chart
Peer Groups included in TSR chart for slide 6 Canadian Lifecos – Manulife Financial Corporation, Great-West Life, and Industrial Alliance Global Lifecos – AXA SA, Prudential PLC, Allianz SE, Aviva PLC, Assicurazioni Generali SpA, AIA Group Ltd., China Life Insurance Co. Ltd, Great Eastern Holdings,
Slide 40: Sun Life Investor Relations
Sun Life Investor Relations Leigh Chalmers Senior Vice-President, Head of Investor Relations and Capital Management 647-256-8201 leigh.chalmers@sunlife.com Yaniv Bitton Vice-President, Investor Relations 416-979-6496 yaniv.bitton@sunlife.com S U N L I F E • Q 4 2 0 2 0 40